To calculate the cost of goods sold (COGS) at a specific cost, we need to find the difference between the beginning and ending inventory and add it to the COGS.
Beginning Inventory: $305,500
Ending Inventory: $414,200
COGS: $844,000
To find the Difference in Inventory:
Difference in Inventory = Ending Inventory - Beginning Inventory
Difference in Inventory = $414,200 - $305,500
Difference in Inventory = $108,700
To find the COGS at cost:
COGS at cost = COGS + Difference in Inventory
COGS at cost = $844,000 + $108,700
COGS at cost = $952,700
Therefore, the COGS at cost is $952,700.
To calculate the inventory turnover rate, we divide the COGS by the average inventory.
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = ($305,500 + $414,200) / 2
Average Inventory = $359,850
Inventory Turnover Rate = COGS / Average Inventory
Inventory Turnover Rate = $952,700 / $359,850
Inventory Turnover Rate = 2.65 (rounded to the nearest tenth)
Therefore, the inventory turnover rate, rounded to the nearest tenth, is 2.7.
To find the largest average inventory needed to theoretically reach the industry standard of five times inventory turnover, we can divide the COGS by the industry standard turnover rate.
Largest Average Inventory = COGS / Industry Standard Turnover Rate
Largest Average Inventory = $952,700 / 5
Largest Average Inventory = $190,540
Therefore, the largest average inventory needed to theoretically reach the industry standard of five times inventory turnover is $190,540.